Credit Cards Rates Rise for Some With Poor Credit

Don't own a home or plan to buy one anytime soon? Well, listen up because the fallout from the country's mortgage problems could still affect you.

Several credit card companies in recent weeks have started to jack up rates for some customers, and other lenders are tightening standards for auto and personal loans.

Banks and lenders, for the most part, are not directly citing the national tightening of credit due to rising mortgage defaults. Most attribute the changes to generally tighter credit for corporations and individuals.

But still, lenders are taking a close look -- whether new or not -- at people's credit, and that is pushing costs higher for some consumers.

The credit cards tie their rates to those set by the Federal Reserve and factor in the number of delinquencies. Since neither of those have changed, neither have credit card rates, McBride said.

Greg McBride, senior financial analyst at Bankrate.com, said that credit card rates have been flat throughout the year. But while overall rates might be flat, it doesn't mean that they're not climbing for some.

"If you start falling behind on payments you're a sitting duck for a higher rate. That's a normal course of business," McBride said. "Unlike the mortgage business, where everybody just woke to the prospect of risk three weeks ago, credit card issuers live credit risk. Their debt is unsecured so they are constantly in this mode of monitoring risk."

McBride said the credit card business has long set different rates based on each individual's credit-worthiness. And while rates for consumers with good credit might not have changed, it is possible that the companies are shifting more people with less-than-perfect credit over to the more-expensive rates.

But nobody knows for sure.

"They keep that very close to the vest," McBride said.

A Routine Review?

No bank wants to be known for rising rates and fees on consumers.

Betty Riess, a spokeswoman for Bank of America, answered almost every question ABC News asked her about the bank's handling of its credit card customers and their rate with a variation of the same phrase: "We periodically evaluate individual accounts and make adjustments based on the individual merits and credit worthiness."

Riess said Bank of America has not changed rates and fees for all customers, emphasizing that decisions are made on "individual merits and credit worthiness" -- a phrase she used six times in a brief phone interview.

While the mortgage crunch may not directly affect credit card interest, it could have an affect on spending habits. Many consumers are using plastic for more purchases as they find it harder and harder to get home-equity loans and other lines of credit.

The Federal Reserve earlier this month released new data showing that Americans are turning to their credit cards more and more often.

Consumer credit rose in June by an annual rate of 6.5 percent, according to the Federal Reserve. The driving force behind that jump was credit card use.

The number of people getting accepted for credit is also dropping, a trend going back further than the recent fallout from the subprime lending market. Most Americans already have credit cards, so it becomes "tougher and tougher" to sign up new, credit-worthy customers, said Robert Hammer, chief executive of R.K. Hammer, a private investment banking firm that advises credit card companies.

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